Sean Callow, an analyst at Westpac, suggests that the support for USD/JPY from rising US yields is starting to moderate.

• “The 10 year Treasury yield briefly printed a 6 week high on Tuesday but it looks comfortable around 1.80%, consistent with USD/JPY’s struggle to extend far beyond 109.00.
• Risk appetite could hardly be more supportive, with global equities reaching fresh record highs this week and USD/JPY 1mth implied volatility retesting April lows around 5%.
• So it seems unlikely that global risk appetite will be sufficient fuel for a run at 110.
• Short-covering of speculative positions has probably run its course.
• With the BoJ’s cautious policy tweaks last week almost forgotten already, this leaves US yields and broad US$ sentiment as key in the week ahead. Resilient DXY short term suggests support on dips towards USD/JPY 108 and some fresh probes above 109 but no major range breakout.”